Advantages of buy-back

Buy-back have the following advantages:

Ø A company with capital, which cannot be profitably employed, may get rid of it by resorting to buy-back, and re-structure its capital.

Ø Free reserves which are utilized for buy-back instead of dividend enhance the value of the company’s shares and improve earnings per share.

Ø Surplus cash may be utilized by the company for buy-back and avoid the payment of dividend tax.

Ø Buy-back may be used as a weapon to frustrate any hostile take-over of the company by undesirable persons.